The chief of CJ Group, a local food and entertainment conglomerate, appeared before prosecutors Tuesday to face questioning over suspicions that he created massive secret funds and evaded taxes in the process.
Lee Jae-hyun showed up at the Seoul Central District Prosecutors' Office in southern Seoul around 9:30 a.m. after receiving notice of the summons last week.
"I apologize for causing the people to worry, and I will sincerely respond to the investigation," the embattled chairman told reporters.
Accompanied by his lawyers, Lee entered the prosecution office without answering further questions.
Since raiding the group's headquarters on May 21, the prosecution office has been zeroing in on the 53-year-old industry mogul and his family for their alleged creation of illegal funds for personal use and tax evasion.
Prosecutors said they suspect that Lee dodged 51 billion won (US$44.5 million) in taxes by stashing secret funds offshore. Lee also allegedly misappropriated 60 billion won in company funds.
The country's 10th richest man is additionally accused of misappropriating another 35 billion won in company funds by fraudulently purchasing two buildings in Tokyo, they added.
Lee will be questioned over whether he stashed millions of dollars in secret funds by using fake deals on expensive art pieces through one of the country's well-known art galleries, prosecutors said.
Sources say the prosecutors have found evidence that dozens of the group's executives had purchased up to 300 pieces of art since 2005 and are now trying to find out whether Lee is the actual owner of the artworks.
Hong Song-won, head of Gallery Seomi, was twice summoned by prosecutors last week to face questioning over suspicions that she had assisted Lee in stashing funds by inflating the costs or forging papers in the purchase of the artworks.
Among the items are high-value pieces by leading contemporary artists such as Andy Warhol and Jeff Koons, prosecutors said.
Also, the chairman is under suspicion of hiding massive assets in overseas accounts to fraudulently purchase shares of his companies to increase his stakes in CJ Group, they said.
Lee allegedly reaped profits worth more than 5 billion won from purchasing shares of its subsidiary CJ Cheiljedang Co. between November 2008 and July 2010.
As part of the stock manipulation probe, the investigators have been gathering data from concerned organizations, including the country's main bourse operator, the Korea Exchange, to track down irregularities regarding CJ shares.
The probe is based on the assumption that Lee, if he used the offshore slush funds, might have disguised himself as a foreigner to invest in the domestic stock market.
It is not the first time the tycoon has been accused of various wrongdoings.
In 2008, police revealed that Lee had secretly managed large funds under borrowed-name bank accounts and ordered him to pay 170 billion won in taxes. However, the National Tax Service did not file a criminal complaint against the company at the time.
CJ Group claimed its chairman had inherited the funds from his grandfather and the founder of Samsung Group, Lee Byung-chull, and the group had paid the 170 billion won in taxes.
Lee Jay-hyun is the eldest son of Lee Maeng-hee, who is the elder brother of Lee Kun-hee, chairman of Samsung Electronics Co.
Now attention focuses on whether the prosecution will seek an arrest warrant against the chairman.
Lee will be intensively quizzed over his alleged illegalities until late Tuesday night, prosecutors said, adding that they are mulling over requesting the warrant.
However, it is also possible that he will be once again summoned on Wednesday, they said, adding that a decision over his detention will be made depending on the outcome of Tuesday's questioning.
Meanwhile, the vice president of CJ Global Holdings, identified only by his family name of Shin, is to be indicted and put under arrest on Wednesday, prosecutors said.
Shin, who has been accused of playing a key role in managing massive slush funds for Lee, will be charged with his alleged involvement in criminal activities, including embezzlement, tax fraud and dereliction of duty, they said.